This invention relates to a data processing system and method. Particularly this invention relates to a data processing system for the authorization and fast available use of tax refund amounts by way of a tax filer's credit card account. Recently the United States Internal Revenue Service (IRS) has allowed tax filers to electronically file their tax returns. By automating the filing system, the IRS has created capabilities for providing refunds through electronic funds transfer using the U.S. Treasury ACH origination system. Electronic filing enables a tax filer to receive a direct deposit of their refund into an account at an ACH bank which has allowed a tax filer to receive funds from the IRS in as little as 10 days.
Additionally, U.S. Pat. No. 4,890,228 (hereinafter referred to as the Longfield patent), issued in December of 1989, describes a data processing system which shortens the time from filing to receipt of funds to as little as one day. In Longfield, on the basis of tax filer created data, an electronic filing program prepares a 1040, 1040A, or 1040EZ federal tax return acceptable for electronic transmission to the IRS. Concurrently, the tax filer applies for a refund loan, and, on the basis of tax filer provided and approved credit data, a deposit/payment account is opened at an authorized financial institution which issues an advance payment of the tax filer refund. After creation of the deposit/payment account and the payment of the early refund advance, the tax return data which has been electronically filed with the IRS via electronic transmission to IRS computers includes identification of the deposit/payment account designated to receive electronic fund transfer refunds directly from the IRS through the ACH system. The payment of the actual refund from the IRS acts to reimburse the authorized financial institution for the advance payment of the refund it made to the tax filer.
While current electronic filing systems, such as created by the IRS and as described in Longfield, have shortened the time for obtaining a refund payment, there are still problems with obtaining early refunds not solved by these systems. For example, in Longfield, a tax filer must act through an authorized financial institution. These institutions charge transaction fees for their participation which when expressed as an APR may be very high. These transaction fees are deducted from the advance payment of the refund. These transaction fees and resulting high APR's have deterred many tax filers from participating in the system described in Longfield. Only tax filers who need the early refund right away tend to participate in the early refund system of the Longfield invention. Additionally, many financial institutions will not participate in these programs due to the risk of not obtaining reimbursement for the payments made to the tax filers from the deposit/loan accounts. This risk has recently been increased due to the United States government's refusal to continue to provide the Direct Deposit Indicator which served to warn the participating authorized financial institutions that the indicated refund might not be deposited electronically into the deposit/loan account.
In contrast, the system of the present invention shortens the time that funds from a tax refund are made available to the tax filer to as little as one day while lowering transaction costs to tax filers and lowering risks to participating financial institutions. These advantages will lead to increased participation in electronic filing by tax filers, who have not relied on electronic filing in the past. Furthermore, conservative financial institutions may elect to participate due to decreased risk of not being reimbursed for the funds made available to the tax filer. The system of the present invention may also have the beneficial effect of encouraging the filing of tax returns as well as increasing the accuracy of the returns.